Understanding Obama’s sequester bombshell

Understanding Obama’s sequester bombshell

By Robert Romano — Under the Budget Control Act of 2011, which will implement approximately $53.8 billion of sequestration cuts to outlays in 2013, the White House Office of Management and Budget (OMB) was required to submit to Congress its plan for implementing the cuts.

That should have been presented, along with its annual budget “[o]n or after the first Monday in January but not later than the first Monday in February of each year.”

As of Feb. 11, OMB has still not submitted its budget for the year along with its sequester plan — despite having almost two years to plan, including a two month delay to sequester that was supposed to kick in on Jan. 2.

Or anyone to see just how small those cuts really are, we might add — but more on that later.

The Obama Administration warns ominously that the cuts “threaten thousands of jobs and the economic security of the middle class.” Outgoing Defense Secretary Leon Panetta warned that the defense cuts would result in a “hollowed” out force.

Based on those panicked claims, if the cuts go into effect on March 1, we suppose that by, say, April 1, unemployment will jump to 20 percent, and the Chinese will be occupying Hawaii, Japan, and South Korea. Right?

As taxpayers you are entitled to know the truth, and to have a ready means of verifying some of the White House’s assertions.

For example, for the Small Business Administration (SBA), the White House alleges that “the automatic cuts triggered by a sequester would reduce loan guarantees to small businesses by up to $540 million.”

What the White House leaves out of its “fact sheet” is that the SBA’s “Business Loans Program Account” will only be cut by $29 million under sequester in 2013, leaving $330 million in untouched budget authority, according to OMB’s preliminary estimate.

But wait, how could a $29 million budget cut result in $540 million fewer loans? Leverage. The SBA actually does about $12 billion of guaranteed loans every single year according to Entrepreneur.com — even with its annual budget authority in the hundreds of millions.

This is confirmed by the White House’s 2013 SBA budget request for “$497 million in new budget authority for the Business Loans Program account,” which actually “supports $14 billion in 7(a) term loans and $2 billion for 7(a) revolving lines of credit.”

Based on that rough proportion, with $330 million of budget authority for 2013, the SBA should be more than able to still support $10.6 billion of loans this year. Which is hardly the budget catastrophe the White House alleges. They will barely miss the $540 million less loans.

Yet to believe Obama, somehow this modest cut to SBA will “constrain financing needed by small businesses to maintain and expand their operations and create jobs.” Please.

To offer another example — there are actually very few to point to in the “fact sheet” since there are so few dollar amounts even provided — the White House complains that Native American tribes “would lose almost $130 million in funding from the Department of the Interior.”

Interestingly, that amount was actually less than what the OMB report stated for FY 2013 of a $212 million of budget authority cuts to the Bureau of Indian Affairs and the Bureau of Indian Education.

What the White House leaves out is that those two bureaus will still receive $2.2 billion of new budget authority in 2013. Again, no catastrophe. They’ll get by just fine.

It’s like that across the entire OMB sequester report. Affected government programs face reductions of anywhere from 7.6 percent to 9.4 percent. Some may even see a 10 percent cut. What it all means is these programs will still roughly receive 90 cents or so on the dollar — in every single affected category.

No programs — none — are eliminated under sequestration. The cuts are not prioritized. They are across the board to non-exempted programs. It must be noted that the cuts per department and agency would be even smaller had fewer programs been exempted.

Exempted programs included Social Security, most of Medicare, Medicaid, unemployment, food stamps, and other entitlement and welfare programs.

Recall that the $85 billion reduction of budget authority comes out of a $3.5 trillion budget — just a 2.4 percent overall cut. If these cuts had truly been across the board to every program, affected programs would be seeing 97.6 cents on the dollar they saw last year instead of 90 or so.

Overall, instead of providing a sober assessment of the budget, as is required under law, the White House decided instead to proffer a misleading “fact sheet” right before the weekend to incite hysteria. And the more hysterical their claims become, the more obvious it should be they are full of it.

Perhaps their biggest fear is that if this mere 2.4 percent cut to the budget actually is allowed to go into effect — nobody will notice.

Robert Romano is the Senior Editor of Americans for Limited Government.

Replies to This Discussion

Exempted programs were SS Medicare and Medicaid...Ho Hum! those just happen to be the three programs which continue to cause big budget deficit....Let me guess...at the last minute there will be a special exemption for deff dept and IC....the beat goes on until all the lenders wise up/// the beat goes on, except that fuzzy math and smoke with mirrors cannot last forever...Push it up to the next election and let the other guy handle the problem...whatta plan! All obumber wants is to please his constituency with payoff... Time for us conservatives to be heard and believed.